000			03754cam a22003857 4500
001			w14760
003			NBER
005			20211020111550.0
006			m o d
007			cr cnu||||||||
008			210910s2009 mau fo 000 0 eng d
100	1		_aBarro, Robert J.
245	1	0	_aStock-Market Crashes and Depressions / _cRobert J. Barro, José F. Ursúa.
260			_aCambridge, Mass. _bNational Bureau of Economic Research _c2009.
300			_a1 online resource: _billustrations (black and white);
490	1		_aNBER working paper series _vno. w14760
500			_aFebruary 2009.
520	3		_aLong-term data for 30 countries up to 2006 reveal 232 stock-market crashes (multi-year real returns of -25% or less) and 100 depressions (multi-year macroeconomic declines of 10% or more), with 71 of the cases matched by timing. The United States has two of the matched events--the Great Depression 1929-33 and the post-WWI years 1917-21, likely driven by the Great Influenza Epidemic. 41% of the matched cases are associated with war, and the two world wars are prominent. Conditional on a stock-market crash (return of -25% or less) in a non-war environment, the probability of a minor depression (macroeconomic decline of at least 10%) is 22% and of a major depression (at least 25%) is 3%. For contexts of currency or banking crises that occur during times of global distress, these probabilities rise to 46% and 8%, respectively. These depression odds applied to the stock-market crashes of 2008 in the United States and many other countries. In reverse and again in a non-war environment, the probability of a stock-market crash (return of -25% or worse) is 67%, conditional on a depression of 10% or more, and 83% for 25% or more. Thus, the largest depressions are particularly likely to be accompanied by stock-market crashes. We allow for flexible timing between stock-market crashes and depressions for the 71 matched cases to compute the covariance between stock returns and an asset-pricing factor, which depends on the proportionate decline of consumption during a depression. If we assume a coefficient of relative risk aversion around 3.5, this covariance is large enough to account in a familiar looking asset-pricing formula for the observed average (levered) equity premium of 7% per year. This finding complements previous analyses that were based on the probability and size distribution of macroeconomic disasters but did not consider explicitly the covariance between macroeconomic declines and stock returns.
530			_aHardcopy version available to institutional subscribers
538			_aSystem requirements: Adobe [Acrobat] Reader required for PDF files.
538			_aMode of access: World Wide Web.
588	0		_aPrint version record
690		7	_aE01 - Measurement and Data on National Income and Product Accounts and Wealth • Environmental Accounts _2Journal of Economic Literature class.
690		7	_aE21 - Consumption • Saving • Wealth _2Journal of Economic Literature class.
690		7	_aE23 - Production _2Journal of Economic Literature class.
690		7	_aE44 - Financial Markets and the Macroeconomy _2Journal of Economic Literature class.
690		7	_aG01 - Financial Crises _2Journal of Economic Literature class.
690		7	_aG12 - Asset Pricing • Trading Volume • Bond Interest Rates _2Journal of Economic Literature class.
700	1		_aUrsúa, José F.
710	2		_aNational Bureau of Economic Research.
830		0	_aWorking Paper Series (National Bureau of Economic Research) _vno. w14760.
856	4	0	_uhttps://www.nber.org/papers/w14760
856			_yAcceso en línea al DOI _uhttp://dx.doi.org/10.3386/w14760
942			_2ddc _cW-PAPER
999			_c333361 _d291923